Law and Economics Commons^™

Legal And Market Uncertainty In Market-Based Instruments: The Case Of The Eu Ets, Giuseppe Dari-Mattiacci, Josephine Van Zeben

Giuseppe Dari-Mattiacci

‘Legal uncertainty’ is the uncertainty experienced by the parties to a lawsuit with respect to the outcome of litigation. When the consequences of a judgment extend to third parties, legal uncertainty can spread into markets and become ‘market uncertainty’. Thus, market uncertainty has relevant and pervasive consequences not only for the litigants but also for unrelated third parties. We argue that certain types of legal remedies cause the transformation from legal uncertainty into market uncertainty. This problem is particular to ‘artificial markets’, such as those created by the legislator for the purposes of market-based regulation, e.g. the European Union Emission …